District Court’s Construction of the Term “Virtual Machine” Was Erroneous and the Patentee Waived Any Non-Infringement Argument Under the Correct Construction

On remand from the Supreme Court to determine the correct construction of the claim term “virtual machine” in light of Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 U.S. 831, 841-42 (2015), the court held that the district court’s construction was incorrect, and, under the proper construction, there was no infringement. The issue on claim construction was whether the meaning of “virtual machine” includes the limitation that the applications it runs are not dependent on any specific underlying operating system or hardware. The court reviewed the district court’s construction de novo, as the district court did not make any factual findings based on extrinsic evidence that underlie its constructions of the disputed claim term. According to the specification and the prosecution history, the defining feature of a virtual machine was its ability to run applications that did not depend on any specific underlying operating system or hardware. Claim differentiation did not change this meaning, because the meaning of “virtual machine” was clear from the intrinsic evidence and claim differentiation cannot trump the clear import of the specification.

In light of the correct construction, Verifone contended that its accused systems do not infringe as they depend on the specific underlying operating system or hardware. Although Verifone raised this issue in its briefing, Cardsoft did not respond to that argument in its responsive briefing, choosing instead to rely on the argument that there was infringement under the district court’s construction. The Federal Circuit held that Cardsoft’s failure to respond to Verifone’s non-infringement argument was a waiver and therefore, under the proper construction, Verifone did not infringe.

Cardsoft, LLC v. Verifone, Inc., Case No. 2014-1135 (December 2, 2015); Opinion by: Hughes, joined by Prost and Taranto; Appealed From: United States District Court for the Eastern District of Texas, Payne, Mag. J. Read the full opinion here.